Suppose that the economy is characterized by the following behavioral equations! C = 180 + 0.80Y, /= 140 G = 160 T= 110 Equilibrium GDP (Y) = 1960. (Round your response to two decimal places.) Disposable income (Y,) = 1850. (Round your response to two decimal places.) Consumption spending (C) = | (Round your response to two decimal places.)
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- According to the basic discounting principle, individuals value current consumption (i.e. consumption now) more than future consumption (i.e. consumption tomorrow). A) True B) False“According to the Random-Walk Hypothesis of Consumption under Uncertainty, individuals don’t need to optimise their consumption over time since the consumption is totally unpredictable” True or False?Assume that the economy is characterized by the following behavioral equations: C = 200 +(0.5)YD, where YD = Y-T I = 150 + 0.25Y - 1000 i T = 200; G = 250 Money supply (M/p)s = 1600 Money demand (M/p)D = 2Y – 8000 i C is private consumption, Y income, T taxes, I business investment, G government spending, i the interest rate. (1) Find the equation for aggregate demand (Z) (2) Derive the IS equation (Hint: Express the equation with Y on the left side and others on the right side) (3) Derive the LM equation (Express the equation with i on the left side and everything else on the right side) (4) Find equilibrium real output (Hint: plug the expression for the interest rate given by the LM equation in (3) into the IS equation in (2), and then solve for Y) (5) Find the equilibrium interest rate (Hint: plug your answer in (4) into the LM equation in (3))
- Given that the Mundell-Fleming model is one of the innovations of neoclassical economics, do the policy recommendations remain timely and relevant?What does potential GDP mean and what does it mean in terms of neoclassical analysis? Please be sure to utilise examples.State whether the statement is true or false The value of a average propensity to save can never be greater than 1
- What is meant by “excess sensitivity” of consumption? Is this view of consumption consistent with the permanent-income hypothesis? Explain. How does the stock market affect consumption according to the permanent-income hypothesis? Is this prediction in line with the empirical evidence? Explain.Which one of the following statements is false? Group of answer choices -The neoclassical model came to dominate economic thinking in the twentieth century. -The neoclassical model used solar energy as the primary input to production. -The neoclassical model takes a narrower view of human motivations than the behavioral model. -The idea of rationality is at the core of the neoclassical model. -The neoclassical model is the basis for Paul Samuelson’s textbook on introductory economics.What are the limitations of Samuelson general equilibrium model